And speaking of implausible claims brings me to the case of Madden v Waracle Limited and another [2025], in the question of who, exactly, employed Mr Madden.

Mr Madden was an experienced IT contractor who worked as a Scrum Master on a software development project being carried out by Waracle for a banking client. His engagement began in July 2021 and was intended to last until January 2022. Mr Madden was engaged through a recruitment agency and he worked through an umbrella company, Paystream. Under this arrangement, Paystream employed Mr Madden and was responsible for paying his wages, deducting tax and national insurance, and providing statutory employment benefits such as holiday pay, sick pay and pension contributions. However, in September 2021, Waracle informed Mr Madden that his services were no longer required and the assignment ended early.

Following the termination of his engagement, Mr Madden brought claims in the Employment Tribunal. He argued that the umbrella company arrangement was a sham and that, in reality, he had been employed by Waracle. On this basis, he sought four weeks’ notice pay and brought claims including unfair dismissal, disability discrimination and harassment. He relied on authorities such as Autoclenz and Uber, arguing that the tribunal should look beyond the written contracts to determine the true nature of the working relationship.

At a preliminary hearing to decide the question of who was Mr Madden’s employer, the ET rejected Mr Madden’s argument that his employment with Paystream was a sham. It found that the contractual arrangements accurately reflected the reality of the relationship between the parties and that Mr Madden had freely entered into them. The tribunal noted that Mr Madden was an experienced contractor, had worked through umbrella companies before, and had chosen Paystream from available options. It concluded that Paystream, not Waracle, was Mr Madden’s employer and that there was no basis for implying a contract of employment with Waracle.

Mr Madden appealed to the EAT, arguing that the ET had failed to apply the correct legal tests and had not adequately explained its reasoning. However, the EAT dismissed the appeal, finding that the ET had carried out a sufficiently wide-ranging inquiry and had correctly applied the law. It confirmed that the umbrella company arrangement was not a sham and that Paystream was Mr Madden’s employer. Whilst the appeal was dismissed, Mr Madden’s claims for notice pay and discrimination would be decided by another employment tribunal at a future date.

This case highlights the complexities involved in determining employment relationships where umbrella companies or consultancy-style arrangements are used. It demonstrates that, even where an individual works closely with and under the direction of an end client, this will not necessarily give rise to an implied contract of employment. Where the contractual documentation reflects the reality of the working arrangements, and the individual has knowingly and freely entered into those arrangements, tribunals will be slow to disregard them. Employers must always make any employment or consultancy arrangements clear to ensure no confusion.